The corporate exec who became an M&A banker

ING Barings M&A boss, David Eastlake discusses the leap from First Pacific to investment banking.

How have you found the transition from being at a corporate to being at an investment bank?

I was asked that a lot when I first started. People asked how I would cope with clients as opposed to being the client. It actually didn't prove that difficult. Prior to working at First Pacific I used to work at Price Waterhouse and so I was used to dealing with clients.
In terms of what I was doing at First Pacific, I was doing a lot of the M&A work as part of a relatively small team in Hong Kong. So I knew the people at ING Barings very well. It was probably the easiest move I could have made.

What benefits do you have coming from the client side?

You probably understand what a client wants a lot more. You are a lot more used to understanding how the client will perceive a presentation. So you can add value in presentations. Plus I had experience of raising debt and other financing at First Pacific. So I bring broader skills to the role.

Does it give you a greater understanding of the Asian family business dynamic?

First Pacific is a public company where there is a family as the principal shareholder. You get exposure to that, but whether that exposure gives you knowledge of all family situations I couldn't say.

Do you think the key to being an M&A banker in Asia is being able to figure out who the key decisionmaker is, whether it is a family member or a government official or a creditor bank?

It's definitely part of the role, because you always have to sell to the ultimate decisionmaker.

Do you think the Hong Kong and Singapore takeover codes are good blueprints for the rest of Asia?

Generally speaking they are. They are based on a good London model. So, yes, I guess people would like to see those types of takeover codes applied throughout Asia.

Do you think China will try and model its one on Hong Kong's?

They will probably look at Hong Kong's but try and make it more applicable to China. Obviously in China you have a lot more state owned industries, so while you may have a regulatory body like the SFC that would need to sign off on deals, you would probably also need ministerial and state approval. And my understanding is that when the state sells a business in China they have certain floors based on net asset values below which they can't do a deal. So you might see things like that being incorporated into the code.

Do you think this will be a better year for M&A than 2001?

It will be a better year, at least I hope so. Psychologically we have this bad year which we have all put behind us. Speaking for ING Barings, we have a lot of ongoing mandates, and a lot of dealflow coming through.

Do you think Korea will be more active than Singapore this year?

They will both be active, although I wouldn't like to say which would be most active. Korea is a bigger market overall, so generally you might expect it to be more active. There's a lot of activity in the power sector in both countries. They will be two of the more active markets.

Can you see a defining trend emerging that will define M&A in 2002?

China going into WTO has created a lot of excitement. There will be activity there. There will ongoing activity in Singapore and more bank mergers around the region. Also in Singapore, the banks still have to divest their non-core assets.

Do you think Hong Kong mobile phone companies could merge this year?

There are a few players, some very big and some very small. I continue to wonder how the small players keep going. Some of them have to fall by the wayside or be taken over. But if you'd asked me that question a year ago I'd have given you the same answer. And maybe if you ask me in a year's time I will give you the same answer again.

A bit like bank mergers in Hong Kong.

Exactly. People feel it has to happen some time.

How many mobile phone companies can the market profitably sustain?

About three. The problem is that you have three that are so much larger than the others and it's difficult to see how anybody else can catch up.

And the three dominant players are just hoping the others will go out of business, rather than waste money taking them over?

Yes. Unless in the next phase of licensing, these smaller guys are awarded a license and the larger players haven't got one. They might acquire companies for a license.

Do you think SingTel would be interested?

It's true they have had a bad experience, but they might still be keen to get into Hong Kong . SingTel are obviously thinking about China. They'd probably do better to tie up with an existing player.

Like a Smartone?

Yes, like a Smartone. That would be the obvious one given BT's stake.

What's your view on bank mergers in Taiwan?

We started to see it happening last year, and we know a number of the banks are talking to one another. That will definitely be an area of activity.

Is your strategy to go for mid-sized M&A deals, or are you going for the bigger transactions too?

For us it has got to be both. We have traditionally been strong in the mid-sized sector, but we will be focusing on larger transactions and larger clients too. We are using relationships worldwide. There are a lot of companies in Europe and America that we are major lenders to, or provide insurance services to. We are going to target those clients more aggressively and also use our in-country offices to continue to target local blue chips.

Do you think FIG or telecoms will be bigger this year as a contributor to your revenues?

FIG, I think. Although with telecoms, one huge deal can contribute a big fee.

Will there be continued fee cutting?

One trend is that with some operations closing their local offices, it has led to boutique advisors setting up from the former staff, such as in the Philippines. They are prepared to do deals for very low fees and will pitch based only on success fees.

Will the Japanese be more active in Asia?

Some of our clients in the consumer sector interested more broadly in Asia. Kirin is a good example, having bought in the Philippines.

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